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Homebuilders accused of $750 M in wage fraud

A report released in late September by the Laborers' International Union of North America claims systemic underpayment of wages in the residential construction industry, stating that workers have been defrauded out of $750 million in wages a year.

Oct 01, 2008

Los Angeles — A report released in late September by the Laborers' International Union of North America claims systemic underpayment of wages in the residential construction industry, stating that workers have been defrauded out of $750 million in wages a year.

The report, The Newest Victims of the Housing Market Crisis: The Men and Women Who Build America's Homes, is based on an investigation into pay practices by LIUNA.

“The foundation of our country's housing market - already poisoned by suspect mortgage lending practices and unsustainable Wall Street driven overbuilding that has led to as many as 3 million foreclosures and a near meltdown of the U.S. economy - was, it turns out, also built on cheating workers out of millions of dollars in wages,” said LIUNA General President Terence M. O'Sullivan.

The report states that corporate homebuilders created ever greater pressure on their subcontractors to reduce costs to the point where cutting wages and, in some cases, eliminating them, was the only way for subcontractors to compete.

“If I worked 60 hours a week, the pay slips stated I only worked 40 hours,” said Eduardo Acevedo Nava, a 35-year-old residential construction worker. “The amount of money reflected on the paycheck was never correct, and I signed the pay slip because I needed to pay bills and put food on the table.”

Nava was a nine-month employee of SelectBuild, a subsidiary of publicly traded BMHC Corp. and the largest residential construction contractor in the U.S. He is one of several plaintiffs in a suit filed against the company in September in Federal District Court by the law firm of Rothner, Segall and Greenstone in Pasadena, Calif. Nava said he and his co-workers were the “ghosts that build the homes” of America.

Plaintiffs from California, Arizona and Nevada are seeking class action status. SelectBuild employed an average of 10,000 workers during the peak housing boom years of 2005-2007, building homes in developments started by major corporate homebuilders. Workers who have come forward so far recount underpayment of five to 15 hours each week.

Workers who have come forward seeking help from the laborers union, and who have been referred to legal counsel, have detailed several types of underpayment:

Full or partial non-payment of wages.

Failure to pay any overtime, or the amount mandated by law.

Requiring off-the-clock work, such as requiring workers to begin or continue working outside of their recorded work hours.

Not paying for time spent traveling between jobsites or for being required to be at work while awaiting deliveries or completion of work performed by other employees.

Across the country, there are about 1 million workers working in the residential construction industry. According to LIUNA's report, if underpayment for those workers amounted to only one hour per week of overtime, based on $10 an hour over 50 weeks a year, the amount of shorted wages would be $750 million or, for the top 10 corporate homebuilders, 2.2% of their profits.

“It becomes clearer daily that our economy cannot withstand a major industry built on fraud or unsustainable practices,” O'Sullivan said. “As we address the current crisis, we must propose solutions that prevent a recurrence of this crisis and its victimization of homeowners and those who build the homes.”

The report was released in a news conferences in Los Angeles, where the suit was filed, and in Phoenix and Las Vegas, where other plaintiffs worked.

Copies of The Newest Victims of the Housing Market Crisis: The Men and Women Who Build America's Homes, are available by calling 202/942-2246 or by e-mailing [email protected].